Non-Profit Corporation

A non-profit corporation is formed to carry on activities for purposes other than the financial gain of its members. It can earn a profit, but any profit must be used to further the goals of the group rather than be paid out to the members. Some common examples of non-profit corporations include: sports groups, activity clubs, day cares and service groups. Not all non-profit organizations are incorporated.

There are two kinds of non-profit corporations:

Membership Corporations

Charitable Corporations

Financed by members through membership fees, loans, fundraising

Financed by government grants, donations, public property

Primarily for the benefit of members

Primarily for the benefit of the public

Requires at least 1 director

Requires at least 3 directors

May pay a salary to employees

May pay a salary to employees

Members may receive remaining property on dissolution

Members may not receive remaining property on dissolution

May invest its funds as directors think fit, subject to the limitations contained in any gifts and the articles or bylaws

May invest its funds in shares, debentures, bonds, mortgages, or other financial instruments (including mutual funds) in which trustees are by law permitted to invest. Contact your legal advisor or refer to The Trustee Amendment Act, 1998

Some of the reasons to incorporate include:

To have a formal structure under which to operate.

A corporation can take part in legal proceedings in its own name.

To hold title to land.

A corporation can own and sell property in its own name.

To qualify for grants or funding.

Funding opportunities may be greater because the organization may have increased stability.

To apply for a bingo or lottery license; and

To limit the personal liability of members. Generally, a shareholder of a corporation is only liable to the extent of his/her investment in the corporation.

The membership may change, but the corporation continues to exist as the same legal being.

If you don’t incorporate your non-profit, the business will be regarded as an unincorporated association.This is an organization created by an agreement or understanding among a group of individuals. It has no legal status. Its members are personally responsible for any debts of the organization. If it gets into legal trouble, all of its members can be sued individually. Also, title to any property must be in the names of all individual members, which can make buying and selling property difficult.